U.S. government officials handling billions of dollars in oil royalties improperly engaged in sex with employees of energy companies they were dealing with and received numerous gifts from them, federal investigators said Wednesday. The alleged transgressions involve 13 former and current Interior Department employees in Denver and Washington.

Their alleged improprieties include rigging contracts, working part-time as private oil consultants, and having sexual relationships with – and accepting golf and ski trips and dinners from – oil company employees, according to three reports released Wednesday by the Interior Department’s inspector general.

An Interior Department investigation describing a "culture of substance abuse and promiscuity" by workers at the agency that issues offshore drilling leases and collects royalties hit lawmakers Wednesday just as they prepared for votes next week on expanding offshore drilling.

It’s a strange mix, and it couldn’t have come at a worse time for those in Congress pressing to expand oil and gas development off America’s beaches while trying to stave off an election-year rush by Democrats to impose new taxes and royalties on the oil industry.

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"On the eve of Congress starting this big debate you’ve got a horror story of mismanagement and misconduct in programs that are going to be a key part of the discussion,“ Democrat Sen. Ron Wyden said in an interview, adding that it can’t help but influence the debate.

The two-year, $5.3 million investigation by Interior’s inspector general found workers at the Minerals Management Service’s royalty collection office in Denver partying, having sex, using drugs and accepting gifts and ski trips and golf outings from energy company representatives with whom they did government business.

The investigations exposed "a culture of ethical failure“ and an agency rife with conflicts of interest, Inspector General Earl E. Devaney said.

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Between 2002 and 2006, 19 oil marketers – nearly a third of the Denver office staff – received gifts and gratuities from oil and gas companies, including Chevron Corp., Shell, Hess Corp. and Denver-based Gary-Williams Energy Corp., the investigators found.

"Employees frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and natural gas company representatives“ who referred to some of the government workers as the "MMS Chicks.“

The director of the royalty program had a consulting job on the side for a company that paid him $30,000 for marketing its services to various oil and gas companies, the report said.

MMS Director Randall Luthi said in an interview the agency was taking the report "extremely seriously“ and would weigh taking appropriate action in coming months.

But the impact in Congress, where lawmakers are debating an expansion of the offshore oil and gas leasing program by allowing drilling in areas long off limits, was immediate.

"This IG report has it all – sex, drugs and the Bush administration officials once again in cahoots with Big Oil,“ said Democrat Sen. Charles Schumer, whose Joint Economic Committee released a report last year claiming the Minerals Management Service has failed to collect millions of dollars in oil royalties.

Republicans and Democrats promised further scrutiny of the Interior Department agency which last year handled $4.3 billion in royalty-in-kind payments from energy companies drilling on federal lands. Under the program oil companies give the government oil in lieu of cash and the MMS office in turn sells the oil on the open market.

But Republicans rejected suggestions that the scandal makes the need for more offshore oil and gas any less urgent.

House Democrats on Wednesday offered a broader drilling proposal than they had floated previously. It would lift all moratoria on drilling 100 miles (160 kilometers) from shore and allow energy development beyond 50 miles (80 kilometers) from the coast if a state agrees. Waters closer than 50 miles would continue to be protected.

The drilling measure is part of a broader energy package that also would roll back tax breaks for the largest oil companies and require them to pay additional royalties, with the money to be used to spur renewable energy programs and conservation.

Democrat House Majority Leader Steny Hoyer called it "a strong bill that will increase responsible drilling and invest in renewable energy“ and said those criticizing it would "rather have a political issue.“

But House Republican leader John Boehner accused the Democrats of "trying to pull a hoax on the American people.“ He said the plan would result "in little or no new American energy production“.

A former Roman Catholic priest already facing dozens of charges related to allegations of sexual abuse at an exclusive Australian boarding school has been charged with an additional 60 child sex offenses, police said Wednesday.

Fannie Mae and Freddie Mac are expected to be taken over by the government as soon as this weekend in a bold move designed to protect the mortgage market from the risk the companies could fail, a person briefed on the matter said Friday night.